A company intends to invest in a new painting hall. There are two complete investment options, Alt A and alt B. These two options are listed below: Alt A 2600 Alt B Basic investment 1800 Payment surplus year 1 Payment surplus year 2 Payment surplus year 3 Payment surplus year 4 Payment surplus year 5 Payment surplus year 6 Payment surplus year 7 Payment surplus year 8 470 470 470 470 470 470 410 410 410 410 410 410 470 470 Residual value after year 6 I Residual value after year 8 60 All amounts in thousands of kronor! Option A has a lifespan of 8 years and Option B of 6 years. The discount rate is 8%. Show three relevant ways to compare investments. Write these clearly under points 1, 2 and 3. Calculate and explain why you used each calculation method! Choose options and motivate!

A company intends to invest in a new painting hall. There are two complete investment options, Alt A and alt B. These two options are listed below: Alt A 2600 Alt B Basic investment 1800 Payment surplus year 1 Payment surplus year 2 Payment surplus year 3 Payment surplus year 4 Payment surplus year 5 Payment surplus year 6 Payment surplus year 7 Payment surplus year 8 470 470 470 470 470 470 410 410 410 410 410 410 470 470 Residual value after year 6 I Residual value after year 8 60 All amounts in thousands of kronor! Option A has a lifespan of 8 years and Option B of 6 years. The discount rate is 8%. Show three relevant ways to compare investments. Write these clearly under points 1, 2 and 3. Calculate and explain why you used each calculation method! Choose options and motivate!

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 52P

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